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Journal articles


Internal displacement and external migration in a post-conflict economy: Perceptions of institutions among migrant entrepreneurs

Nick Williams, Adnan Efendic

This article examines the trust of institutions among internal and external migrant entrepreneurs in the post-conflict economy of Bosnia and Herzegovina. Drawing on survey data and in-depth interviews, we find that external migrant entrepreneurs with international experience have lower trust in institutions than internal migrants. This is explained by the comparison of institutions in the country of origin with more stable institutional environments they experienced while being abroad. Consistent with this conclusion, a more complex institutional setup within the country is associated with lower trust in institutions. We also show that personal network diversity has a differential impact on trust, with individuals in more ethnically diverse areas and networks reporting lower trust, reflecting the possibility that institutions are not ethnically neutral and inclusive enough.

The Effect of Ethnic Diversity on Income – an Empirical Investigation Using Survey Data from a Postconflict Environment

Adnan Efendic and Geoff Pugh

This empirical study is based on nationally representative cross-sectional survey data gathered to investigate the effect of ethnic diversity on personal and family incomes in Bosnia and Herzegovina (BiH), a post-conflict society. The 1992–1995 conflict was harmful for ethnic diversity. Yet, two decades later, where it still exists, ethnic diversity gives rise to positive economic consequences. After controlling for other influences, the authors find lower probabilities of respondents in ethnically diverse neighbourhoods being in the lowest income categories but higher probabilities of being in medium and higher income categories. The largest effects are the reduced probabilities of respondents reporting no income, and are thus particularly relevant to poverty reduction. At the limit, their estimates imply an income gap of more than 20 per cent between a counter-factual completely heterogenous environment and a counter-factual completely homogenous environment. Policy makers in this post-conflict country, and in similar environments elsewhere, should take into consideration the economic costs of policies supporting ethnic homogeneity over diversity.


Traditional Home Slaughtering of Animals in the Framework of EU Legislation. Evidence from Bosnia and Herzegovina

Ismet Kumalić

Traditional home slaughtering of animals is a widespread social practice in the Western Balkans, bringing together families, neighbours, and friends, and contributing to the rise of social capital. Bosnia and Herzegovina is a multicultural country where traditional home slaughtering of animals is mostly practised as seasonal slaughtering by Christian communities and as religious slaughtering by Muslim communities. In the framework of existing EU legislation, meat that comes from home slaughtering can be used for private consumption only. However, these rules are not fully aligned with the practices existing on the ground. This article argues that the Western Balkans’ integration into the EU can affect the sustainability of these practices, and it is therefore necessary to amend the relevant legislation and policies to ensure the implementation of EU regulations while respecting the traditional way of communal meat sharing.


Informal Economy in Bosnia And Herzegovina - An Empirical Investigation

Edin Pasovic, Adnan S. Efendic

This paper explores the size of informal economy in Bosnia and Herzegovina (BiH) over the period 1998-2016, based on an indirect method of measurement known as MIMIC approach (Multiple Input Multiple Causes). As the underlying determinants of informal economy in BiH we include tax burden, the level of unemployment, the size of agricultural sector and the level of government subsidies. We estimate that the average informal economy for the observed period was 34% of GDP, being the largest in 1998 (43%) and the smallest in 2009 and 2016 (30%). There is a modest decreasing trend of the size of informal economy over time. Our model identifies two structural brakes over the observed period; the first positive one is linked to the introduction of the value added tax in 2006 (a decrease in 2007-2009 follows) and, the second one captures a short-run negative effect of the latest global economic crisis in 2009 (an increase 2010-2011). To further asses these results and check their consistency with available primary data, we investigate the size of the undeclared work, assess tax morality and additional income of families coming from informal sector; these indicators provide consistent results with the MIMIC outcomes.


The EU's Democracy Promotion Meets Informal Politics: The Case of Leaders' Meetings in the Republic of Macedonia

Nenad Markovikj, Ivan Damjanovski

Previous studies of the effects of EU political conditionality on democratic consolidation in the candidate countries have been predominantly centered on the formal aspects of institutional compliance. But what happens when EU demands are met by EU brokered decisions in an informal, extra institutional setting? International actors, predominantly the USA and the EU, have played an essential political role in the democratization of the Republic of Macedonia ever since its independence. In times of political crises, the role of the international actors is further accentuated by the inability of domestic political parties to find a solution to specific political dead ends that seem to occur regularly in Macedonian politics. The paper analyzes the effects of EU engagement in stimulating, instigating, and managing extra-institutional political formats of decision making on democratization and institutionalization in Macedonia. The analysis focuses on the leadership meetings during political crises that have resulted in such package deals as the Ohrid Framework Agreement, the Law on Territorial Organization, and the May Agreement, with a predominant accent on the 2014 political crisis in Macedonia and its ongoing resolution. The paper argues that while such informal practices of conflict resolution might be effective in the short run, they could negatively impact the long-term prospects of institutionalization.


Understanding the Informal Economy in Practice – Evidence from Bosnia and Herzegovina

Nirha Efendic, Edin Pasovic, Adnan Efendic

This paper provides insights into the informal economy of Bosnia and Herzegovina (BiH), a post-conflict transition economy in the Western Balkan region aspiring to became part of the European Union. After the introductory section and literature review, we introduce the economic outlook of BiH and then provide evidence estimating the size of the informal economy, which is identified to be around 30% over the last couple of years. As the size of the informal economy is high and persistent, this implies that current policy approaches are not efficient in tackling this economic challenge. To understand how the informal economy operates in practice, we use data from two different surveys to assess tax morality, undeclared work and the structure of the participants in the informal economy. In the next section, we supplement the study with ethnographic insights. In particular, we identify how participants in the informal economy use it for different purposes and with different motives. This includes reliance on the informal economy as a survival strategy for households, as a way to supplement insufficient formal income, to compensate for economic insecurity, or to decrease costs of formal business by using “envelope wage” practices, but equally importantly to overcome formal institutional rigidities linked to current contradictory laws.


Kumstvo (Montenegro). In: Ledeneva, Alena (ed.). The Global Encyclopaedia of Informality. Volume 1.

Klāvs Sedlenieks

Kumstvo (from kum a godfather, kuma – a godmother, kumovi – plural form.) is an informal network based on fictive kinship in Montenegro (a similar term associated with slightly different practices exists elsewhere in Bosnia, Serbia and Croatia). Kumstvo is one of the most venerated social institutions in Montenegro, often described with the words ‘kumstvo is holy’ (‘kumstvo je svetinja’). Kumstvo plays a significant role in the informal ties that permeate Montenegrin society. Kumovi, just like blood relatives, are supposed to help each other and in most cases they do so in spite of formal bureaucratic ideals, thus often leading to nepotism. Kumstvo often plays the role of as a semi-institutionalised friendship and, but in contrast to kinship ties, is much less visible and more flexible (as one can choose a kum, while kin is less subject to choice). In Montenegro and elsewhere in the region kumstvo pays a significant role in the way how informality is organised. In particular it serves the purpose of creating space of manoeuvring based on the intimate knowledge of people that one knows.


Alga Aploksnē (Latvia). In: Ledeneva, Alena (ed.). The Global Encyclopaedia of Informality. Volume 2.

Klāvs Sedlenieks

The Latvian terms alga aploksnē (‘salary in an envelope’) and aplokšņu alga (‘envelope wage’) refer to an undeclared part of a regular wage, concealed to allow the employer to evade a proportion of compulsory labour and social security taxes. The term derives from the widespread practice of handing over such salaries in envelopes, rather than by bank transfer or in an open, over-the-counter manner. This practice can be seen as part of a wider family of practices whereby the income of an employee or contractor is completely or partly concealed from the authorities. All neighbouring countries of Latvia have terms and practices that are virtually identical to Latvian alga aploksnē: Estonia (ümbrikupalgad), Lithuania (alga vokeliose), Russia (zarplata v konverte), Belarus (zarplata ŭ kanvertse). Similar terms also exist in Ukraine (zarplata v konverti), Moldova and Romania (salariu într- un plic) and Bulgaria (pari v plik). All of these terms literally mean ‘salary in an envelope’, and refer specifically to the arrangement of concealing a given part of the regular salary (as opposed to undeclared earnings in general). Other societies may have similar practices but lack a particular term (e.g., Serbian rad na crno). However, it seems that neither the term nor the practice goes beyond the area of post-socialist countries in Central and Eastern Europe and Russia.


From Refugees to Trans-local Entrepreneurs: Crossing the Borders between Formal Institutions and Informal Practices in Bosnia and Herzegovina

Hariz Halilovich and Nirha Efendic

This article focuses on the former war refugees, who (partly) returned to their homeland Bosnia and Herzegovina and became significant investors in their local communities. We are particularly interested in their experiences with manoeuvring between different countries and institutional environments, as these refugee entrepreneurs are running their businesses simultaneously in developed European economies (Switzerland and Sweden) and in their home country. Although the two companies run by the former refugees described in the article are located in the areas that remain divided along the ethnic lines caused by the war (Srebrenica and Banja Luka), we find that the post-war returnees’ businesses are ethnically tolerant and inclusive, sending a powerful message to the formal institutions, which often act in the opposite way.


Religiosity and Informal Economic Practices in Southeastern European Societies

Nemanja Krstić, Jelena Dinić and Danijela Gavrilović

The dominant religions in Southeastern European countries (Serbia, Macedonia, Montenegro, Bosnia and Herzegovina, Kosovo, Albania), Orthodoxy, Islam, and Catholicism, contain social teachings, which include several norms that deal with certain forms of economic practices. These post-socialist societies develop various forms of informal practices, some of which are contrary to elements of religious social teachings and religious ethics. In the process of the revitalization of religiosity after the fall of socialism in this region, the question can be posed as to whether the attitude towards informality and the application of certain informal economic practices, which range from the illegitimate to the illegal (getting things “done” through informal connections, tax evasion, corruption), correlates to some extent with the level of religiosity and the type of religion. The results of the research show that there is a connection between belonging to a certain confession or religion, self-declared religiosity and level of religiosity, and approving of informal practices and engaging in them. At the state level, a specific dynamic was developed even when it came to approving of and engaging in informal practices depending on whether the members of certain confessions were a minority or a majority at the level of the observed country.